Capital Commitment and Illiquidity in Corporate Bonds

We study trading costs and dealer behavior in U.S. corporate bond markets from 2006 to 2016. Despite a temporary spike during the financial crisis, average trade execution costs have not increased notably over time. However, dealer capital commitment, turnover, block trade frequency, and average trade size decreased during the financial crisis and thereafter. These declines are attributable to bank‐affiliated dealers, as nonbank dealers have increased their market commitment. Our evidence indicates that liquidity provision in the corporate bond markets is evolving away from the commitment of bank‐affiliated dealer capital to absorb customer imbalances, and that postcrisis banking regulations likely contribute.     

Liquidity Measurement Problems in Fast,Competitive Markets: Expensive and Cheap Solutions

Do fast, competitive markets yield liquidity measurement problems when using the popular Monthly Trade and Quote (MTAQ) database? Yes. MTAQ yields distorted measures of spreads, trade location, and price impact compared with the expensive Daily Trade and Quote (DTAQ) database. These problems are driven by (1) withdrawn quotes, (2) second (versus millisecond) time stamps, and (3) other causes, including canceled quotes. The expensive solution, using DTAQ, is first‐best. For financially constrained researchers, the cheap solution—using MTAQ with our new Interpolated Time technique, adjusting for withdrawn quotes, and deleting economically nonsensical states—is second‐best. These solutions change research inferences.     

Price Regulation in Australia: How Consistent Has It Been?

We assemble a database consisting of 52 regulatory decisions made by seven different regulators across five different industries. We examine how the proportion of firms' revenue requirements that were disallowed by the regulator vary by regulator, industry and time. Despite the differences in the implementation of price regulation across industries and across jurisdictions in Australia, outcomes are surprisingly consistent. For example, we show that it is not possible to reject the hypothesis that the regulatory outcomes in South Australia, New South Wales, the Australian Capital Territory and Victoria are similar despite the different regulatory approaches undertaken in these jurisdictions.     

Sensory evaluation and consumer acceptance of carbohydrate-based fat replacers in biscuits

The effect of three different carbohydrate-based fat substitutes in a baking powder biscuit was studied. The various fat replacers were substituted for fat in the biscuit formula at a rate of 33%, 66% and 100%. The biscuit variations were assessed by objective and sensory measurements. Comparable objective and sensory results indicated that crust colour was lightened significantly with increased use of the individual fat substitute. Tenderness decreased as substitute use increased when biscuits were rated by the sensory panel, but opposite results were obtained by the texture analyser. Objective analysis indicated that an increase in use of the fat substitute produced a moister biscuit, which was in agreement with the sensory panel. Consumer location testing rated the biscuits as moderately acceptable, but data did indicate a willingness for a product of this type to become available in the marketplace. The overall results do indicate that a fat substitute can be a viable additive in the basic biscuit, but there is a maximum at which the substitute can be used for fat and still produce an acceptable product.     

Employee Response to Compulsory Short-Time Work

We surveyed 1, 500 workers at a large manufacturing firm who had experienced compulsory reductions in hours and earnings to discover their use of time off and their opinion of the company's short-time compensation program. We estimated time use using a three-way split among working for the firm without pay, nonmarket work, and leisure. In an ordered probit equation designed to explain worker opinion, time use emerged as significant, as did gender and marital status.     

IDENTIFYING CREDIT CRUNCHES

This article identifies four U.S. credit crunches—periods of sharply increased non-price credit rationing—between 1960 and 1992. Extreme intimidation of banks by the Federal Reserve and U.S. federal government through jawboning and credible threats of increased regulatory oversight caused the crunches of 1966 and 1969. Thus, this article overturns the conventional wisdom that Regulation Q produced the 1960s credit crunches. The 1980 crunch was the unintended effect of direct regulatory limits on credit extensions. More recently, a market-induced crunch occurred from early 1990 through 1992 when a collapse of commercial real estate values made pricing risk on real estate-collateralized loans extremely difficult.